Retirement Security Blues

“Retirement Security” is starting to sound like an oxymoron in the current economic climate. If it is any consolation to the people watching their hard earned savings evaporate in the market chaos, the policy makers are starting to take note. There is even a sense of urgency.

Well before the current crisis, at least four provinces established panels to consider pension reform, which garnered limited interest at the time. But when the market downturn started to threaten the solvency of even “gold-plated” defined benefit plans, notice was taken. At the same time, people who have savings in RRSP/RRIFs got some political lip service during the October election and a non-trivial 25% reduction in their mandated RRIF withdrawals – for which CARP ActionOnline readers can take some credit because your emails and letters hit their mark together with the saturation media coverage that the issue generated across the country.

The current crisis gives rise to a common cause for those with private pension benefits, those with some RRSP/RRIF savings and those without any retirement savings at all – namely, the need to provide a secure retirement in which people take the primary responsibility but in which government also has a role, if only to provide some integrity to the landscape.

Pension Reform

CARP has emphasized the need to better protect plan members by dealing with surpluses and deficiencies, contingency funds, to enhance flexibility and portability and to give plan members a governance role.

Reports have been issued by the Ontario Expert Commission on Pensions [October 31, 2008], the Alberta/British Columbia Joint Panel [November 28, 2008] and the Nova Scotia Pension Review Panel [January 27, 2009]. Ontario and Alberta/BC have asked for feedback on their recommendations, Click here for Ontario’s feedback request and here for the Alberta/British Columbia feedback request and the federal government requested further input on pension security issues. The deadlines for comment are short – late February to early March. – either to reflect the sense of urgency or to recognize that they are asking the same questions again.

To be fair, some issues would never have arisen but for the market downturn. For example, the Pension Benefits Guarantee Fund, unique to Ontario, is an employer funded vehicle to deal with potential plan failures. The Ontario report recommended that the guaranteed $1000 monthly benefit be increased to $2500 while acknowledging that a funding formula would have to be found first that did not involve public funds. The latter point is premised on the argument that taxpayers [some without any pension benefits] should not be asked to subsidize those with such benefits.

Universal Pension Plan

For the estimated one in three Canadians who do not have any retirement savings nor access to a private pension plan, CARP has advocated the establishment of a universally available pension fund modeled on the CPP in its essential aspects, namely, mandatory enrolment [possibly with opt-out provisions], a payroll deduction mechanism, professional management, a mandate that is focused entirely on performance and independence from government or a single employer.